Legally questionable model clause: EU Commission’s FAQ on mandatory “no re-export to Russia clause” in contracts

In addition to the re-export ban, companies have to contractually agree upon appropriate remedies if the no re-export to Russia clause should be violated.  

However, such obligation only exists if the delivery includes 

• goods and technologies listed in Annexes XI, XX, XXXV to Council Regulation (EU) 833/2014; 
• common high priority items listed in Annex XL to Council Regulation (EU) 833/2014; or 
• firearms and ammunition listed in Annex I to Regulation (EU) 258/2012. 

In addition, the obligation does not apply if the delivery is made to a partner country, currently the US, Japan, United Kingdom, South Korea, Australia, Canada, New Zealand, Norway and Switzerland (acc. to Annex VIII to Council Regulation (EU) 833/2014).  

Furthermore, existing contracts concluded before December 19, 2023 are subject to exemptions until December 20, 2024.  

EU Commission’s FAQ 

On February 22, 2024, the EU Commission adopted FAQs on the no re-export to Russia clause’s application and structuring. In addition to the scope of application and the treatment of existing contracts, these FAQ also include important interpretation aid in terms of appropriate remedies. The Commission emphasizes that the contractual sanctions should deter the goods’ recipient from re-exporting the goods to Russia. To that end, the clause should include, in addition to an extraordinary termination right, a noticeable contractual penalty.  

Model clause 

The FAQ contain a model clause which, in the Commission’s opinion, meets all requirements pursuant to Art. 12g of Council Regulation (EU) 833/2014.  

After having examined the clause, we expressly advise against using the sample clause 1:1 in contracts, to the extent these contracts are governed by German law. The sample clause takes into account the requirements pursuant to Art. 12g, however, in our opinion, the German requirements for an application of general terms and conditions (GTC) are not met. For example, the determination of the contractual penalty’s amount is unclear and, among others, there is no regulation as to whether and how the contractual penalty can be offset against other claims for damages.  

German GTC law does not only cover clauses specified as “General Terms and Conditions”, but all contractual clauses if these have been drafted for multiple use or are actually used multiple times. Therefore, standard contracts and standard clauses generally qualify as GTC.  

If the clause does not stand up to a content review under German GTC law, it will be classified as invalid by a civil court. In such case, it is no longer considered contractually binding or agreed. 

Due to the strict requirements under German GTC law, the clause should therefore be used only in a revised form which has been adapted to contracts. We recommend involving a legal department or specialist lawyers in doing so.  

Furthermore, these GTC clauses must have been effectively included in the contract, which is generally not the case if, for example, reference to the GTC or the no re-export to Russia clause is only made in the order confirmation.  

The legal consequence of an invalid no re-export to Russia clause is that the contract does not contain a re-export ban to Russia, which might constitute a breach of Art. 12g of Council Regulation (EU) 833/2014 which is punishable by fines and criminal penalties. In such case, the acting parties and the company might be subject to fines or, in case of willful intent, even to imprisonment.